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The regulator has commenced proceedings against a private lender.
The Australian and Securities Commission (ASIC) has commenced proceedings against private lender Oak Capital.
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In an announcement on Wednesday, the financial services regulator said it had commenced proceedings against Oak Capital for “allegedly engaging in unconscionable conduct to avoid the National Credit Code”.
ASIC alleges that between 7 March 2019 and 4 October 2023 the private lender wrote up to 47 loans totalling more than $37 million under a model that was “designed to avoid the application of the Code and the National Consumer Credit Protection Act 2009”.
The regulator contends that loans were written to companies rather than the individual borrowers to avoid the operation of the Code and the Credit Act “in circumstances where Oak Capital knew, or ought to have known, that the loan was for a domestic, personal or household purpose (such as a home loan) and would otherwise be captured by the Code”.
The regulator alleges that this lending model required a company being named borrower in circumstances “where the company did not benefit from, or have any genuine interest in, the loan and there was no reason for Oak Capital to consider that the company borrower would repay the loan”.
ASIC alleges that, in most cases, individuals seeking their loan provided their homes as security.
In the announcement, ASIC also alleges: “Oak Capital made loans to companies with no or minimal assets or current trading activities.
“Some companies had even been established for the purpose of obtaining the loan only days prior to the loan settlement.
“Given their distressed financial circumstances, several individuals defaulted on their loans and Oak Capital repossessed their homes.”
Sarah Court, ASIC deputy chair, said: “As a result of loans being treated as unregulated, we allege Oak Capital deprived its clients of important consumer protections, including responsible lending obligations, the right to make a hardship application and protection from being charged excessive fees and interest.
“These protections are critical in the current financial climate where borrowers are more likely to be at risk of serious financial hardship. ASIC will continue to take action where we consider business practices are designed to avoid consumer credit protections.”
In a media statement provided to The Adviser, Oak Capital said it maintains that it has complied with the law and acted in accordance with industry practices.
“Oak Capital has responded to all ASIC requests and notices relating to the subject matter since November 2022. Oak Capital vigorously refutes the allegations of misconduct and will contest the claims,” the statement read.
“Over the past decade, Oak Capital has established itself as a leader in the mid-tier non-bank lending market. We are committed to full compliance with all regulatory frameworks and uphold the highest standards in delivering financial services.
“Oak Capital respects the regulatory body's role in maintaining industry standards and is committed to defending its position.”
[Related: ASIC warns of potential AI ‘governance gap’]
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